21 October 2012

Last week was anti-poverty week, and amid all the stories about reductions in the entitlements of single parents and the paucity of the Newstart allowance rate this one caught my eye. Although it didn't deal directly with the issue, the case seems to involve, among other things, a single parent who has part-care of his children. The comments that follow the article express various levels of support and/or sympathy mixed with the usual "get a job" sentiments. There are also some questioning the amount of assistance he received, which appears to be just single Newstart allowance - no payments in respect of his children.

Part-care of children brings with it some complicated rules around how much, if any, family assistance can be paid, with similar provisions around child support entitlements or liabilities. At the extremes, a parent with no care of their child won't receive any child-related assistance, and will generally have to pay child support, whereas a parent with 100% of the care gets all the child-related assistance and will generally receive child support. As care increases from zero there is a kind-of graduated sharing of family assistance entitlements. I say "kind-of" because it's not a smooth transition - the family assistance amounts change in a lumpy way over some percentage ranges, not at all over others, and disproportionately in the rest.

A further complication is that adult income support also undergoes changes related to the level of care of the child.

There are many possible combinations of care and payment types but I'll just focus on three as they will illustrate most of the points.

13 October 2012

This week Parliament passed legislation removing the special arrangements ("grandfathering") for parents getting parenting payment since before 1 July 2006. I've done a few posts on this already so I won't repeat the details (see here and here if you want the earlier raves on this subject). The gist of it is that the grandfathered group will now have the same payment arrangements applied to them as everyone who has come on to parenting payment since 1 July 2006. These arrangements are rather less generous for single parents, who will consequently have significant reductions in their incomes when the change takes effect on 1 January 2013. (It's of less significance for partnered parents because they have always had lower Newstart allowance-linked payment rates.)

Parents in the income support system, partnered or single, face changes in the total assistance package provided to them when their children reach significant birthday milestones. Sometimes it's up, sometimes it's down, but the final result is down. By final result, I mean that eventually the parent is no longer considered to have a dependent child, and a significant age for this purpose is 22 years. A 22 year old child becomes eligible for Newstart allowance in their own right (subject to the usual rules about being unemployed, etc) and a 22 year old student child gets a youth allowance that is no longer affected by parental income. If the parent is single then, in the usual case, they will get the single rate of Newstart allowance.

So, under the current arrangements a single parent who still needs income support will typically end up on single Newstart allowance, simply as a consequence of the passage of time. If we compare the assistance package for a single parent with a newborn to that of a single Newstart recipient the size of the eventual transition that must occur is stark.

01 October 2012

A few days ago I put up a somewhat rambling post covering several topics, but mainly focused on the concept of the net income tax threshold. I had prepared a few charts for it that I didn't end up using as they didn't quite fit the theme of the post, at least not without wandering off in yet another direction But waste not, as they say, so I thought I'd pop them up separately with only a few words of explanation.

They are of the same type as Charts 1 to 3 in the earlier post, showing the interaction between transfer payments and income tax (and medicare levy) liability. However, the charts in today's post show this information as at the election of the 40th Parliament (the second-last Howard government) as well as at 20 September this year (part-way through Parliament 43). This makes visible the change over that period in three numbers of interest: the maximum transfer package (at zero private income); the income at which a liability for income tax starts; and the net income tax threshold.

As before, all the charts are adjusted for changes in the CPI so that the 2001 results can be directly compared to today's figures. So without further ado...